The Philippines is a democratic republic with an elected president, an elected bicameral legislature, and a fractious but functioning multiparty system. Although the executive traditionally sets the political agenda, the legislature plays an active role in policy formation. The Constitution provides for an independent judiciary; however, the judicial system suffered from corruption and inefficiency.

The President is Commander-in-Chief of the Armed Forces of the Philippines (AFP). The Department of National Defense directs the AFP, and the Department of Interior and Local Government has authority over the civilian Philippine National Police (PNP). The AFP, which has primary responsibility for counterinsurgency operations, also has duties in traditional law enforcement efforts, including the pursuit of kidnappers, whose actions remained a chronic criminal problem. Local civilian militias help provide security in certain conflict areas. The civilian authorities generally maintained effective control of the security forces; however, some elements of the security forces, including police, soldiers, and local civilian militias, committed human rights abuses; and, on July 26 and 27, a group of junior AFP officers attempted a mutiny.

The country has a market-based, mixed economy. The service sector accounted for approximately 47.5 percent of gross domestic product, the industrial sector 34.3 percent, and agriculture 18.2 percent. However, agriculture accounted for approximately 36.7 percent of total employment. Overseas worker remittances, estimated at $7 billion per year, and tourism were important sources of foreign exchange. The population is nearly 80 million with an annual growth rate of 2.36 percent. According to the most recent Family Income and Expenditure Survey, the richest 30 percent of families earned 66.3 percent of national income, while the poorest 30 percent received approximately 7.9 percent. The incidence of poverty (measured as the ratio of those below the official poverty threshold to the total population) worsened during the year and approached 33.4 percent. Poverty was more severe in rural areas, with an estimated 54 percent of the rural population unable to meet basic needs. Poverty in urban centers was approximately 25 percent.

The Government generally respected the human rights of its citizens; however, there were serious problems in some areas. Some elements of the security services were responsible for arbitrary and unlawful and, in some cases, extrajudicial killings, disappearances, torture, and arbitrary arrest and detention. Other physical abuse of suspects and detainees as well as police, prosecutorial, and judicial corruption remained problems. The constitutionally mandated Commission on Human Rights (CHR) described the PNP as the worst abuser of human rights. Police and local government leaders at times appeared to sanction extrajudicial killings and vigilantism as expedient means of fighting crime and terrorism. Prison conditions were harsh. Judges and prosecutors remained poorly paid, overburdened, susceptible to corruption and the influence of the powerful, and often failed to provide due process and equal justice. Long delays in trials were common. The Supreme Court undertook efforts to ensure speedier trials and to sanction judicial malfeasance, and launched a 5-year program to increase judicial branch efficiency and raise public confidence in the judiciary. Despite efforts by reformist leaders in all three branches of the Government to strengthen rule of law and protection of human rights, a fundamental and pervasive weakness in the rule of law contributed to a widely held belief that official justice is beyond reach. Some local military and police forces harassed human rights activists. Violence against women and abuse of children continued to be problems. Discrimination against Muslims persisted. The law provides for worker rights, but implementation and enforcement were not always effective. Child labor continued to be a problem, although the Government and nongovernmental organizations (NGOs) continued to give the problem increased attention. The use of underage workers in domestic servitude persisted. Child prostitution continued to be a problem, as did trafficking in women and children.

A large, well-funded Communist insurgency continued to operate in various regions of the country; its military arm, the terrorist New People's Army (NPA), committed numerous human rights violations, including political assassinations, kidnappings, and torture. The small, terrorist Abu Sayyaf Group (ASG) committed some kidnappings and killings, including summary beheadings of hostages and local residents. The NPA and ASG continued to use children both as soldiers and as noncombatants.